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How does Yahoo! make money?

How does Yahoo make money? No one really clicks on those sites advertised, do they?

  • I know the advertisers pay for advertising. But the advertisers must know that no one actually pays attention to them. Or do they????

  • Answer:

    Yes, people do click on paid search ads. There are two major forms of pay-per-click. One is paid search, where the company pays to have their listing at or near the top of the search results. I set up a Google Adwords account for a friend who has a 4.95% click-thru rate on paid search. It's a different story for the ads that display however - the click through rate on that is extremely low, in my friend's case it is 0.34% so for every 300 impressions there is one click. To summarize, Yahoo and Google make a good return on the paid search end of things, which enables them to "throw mud at the wall" on the display ads that appear all over and make a few extra bucks.

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The answer is simple and very complicated :) Supply and Demand & Branding is King. Advertisers will pay an arm and a leg to make a brand (to sell their product). For example yahoo has a car specific section with millions of unique visitors every day. There are so many ad spots (supply) for a much bigger share of advertisers (demand). Advertisers will pay a lot to sell the new BMW vs Mercedes etc. You might not fully realize it but advertising shapes our lives and our wish-list (creates an illusion of a supply and demand). What shapes our lives our wish-lists and our perceptions has high demand... and that's where yahoo comes into place. Yahoo (or any other communication tool/medium) is the connecting link among sellers and buyers... following the trends and shaping its services according to its customers international, national, local demand.

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